October 1, 2024
October 1, 2024
October 1, 2024
October 1, 2024
Ali illustrates the importance of thinking ahead when it comes to taxes, a key differentiator between employees and business owners. Drawing on personal experience, Ali explains how proper tax planning in the final months of the year can save business owners from unexpected tax burdens. She also underscores the importance of complying with the Corporate Transparency Act to avoid hefty penalties, offering practical tips and resources for legal professionals to assist their clients with the necessary filings.
Key Takeaways:
Ali encourages entrepreneurial lawyers to adopt the mindset of a business owner by planning ahead and setting up structures that support long-term growth and legal compliance. By embracing these practices, lawyers can better serve their clients and build sustainable businesses.
Transcript
Ali Katz:
What you should be getting in really no later by then the end of November are tax projections. Tax projections are critically important for business owners. The first year I hit a million dollars in revenue in my business, 2006, I found out I had a hundred and I think $15,000 tax bill that I wasn't prepared for, unprepared, my CPA said, okay, well, your taxes are going to be about $115,000. I had not put away money for that tax bill. I was not prepared. I didn't do any tax planning before the end of the year, which if I could have, or if I had, I would have ended up cutting that tax bill in half. But by the time that she told me that I owed $115,000 in taxes, it was too late.
Ali Katz:
Welcome to the NewLaw podcast for entrepreneurial lawyers. Here at Personal Family Lawyer we want to help more families and business owners make eyes wide open legal and financial decisions. But we cannot do this without you. Which is why we started this podcast to find those of you ready to offer a better way to serve your clients. So, if you are a legal professional who wants to help improve the legal and financial wellbeing of your clients and offer a service model that differentiates you while meeting the needs of your community, and rest easy knowing that you are running your law practice like a real business, then join us on this journey by subscribing to the show and find out how you can use a new law business model to love your life as a lawyer.
Ali Katz:
Hello everyone. Today we are talking about two critically important topics for this time of the year for anyone in business, especially you as a lawyer. But if you happen to be listening to this and you aren't a lawyer, and you are in business, and you have a business entity, well, it's critically important for you as well. The two topics I am talking about today are the Corporate Transparency Act here in the United States and tax time planning. Now, you might be saying, wait a minute, it's October. Why are we talking about tax time planning? Or it's November, why are we talking about tax time planning? Taxes happen in April. But that's actually an employee mindset, not a business owner or entrepreneurial mindset. So listen in and I'll see you on the other side.
Ali Katz:
As a business owner or an entrepreneur, tax time planning happens in October, November, and December each year, at least if you want to save money on your taxes. And in fact, you might not even be filing your taxes in April. You might be filing for an extension in April. You might be paying some taxes in April, but your actual filings might not happen until September or October. If you are filing an extension, giving your CPA plenty of time to actually get your filings handled, giving you time to get your records updated. The only time in which you, as a business owner, are going to be filing your taxes in April is if you have everything organized and you're getting your CPA, all of your documentation that you need to get to them, usually by mid February. That will give them enough time to file your return by April and not need to file an extension. But what you should be getting in really no later by then the end of November, are tax projections.
Ali Katz:
Tax projections are critically important for business owners. The first year I hit a million dollars in revenue in my business, 2006, I found out I had a hundred and, I think, $15,000 tax bill that I wasn't prepared for. Unprepared, my CPA said, okay, well, your taxes are gonna be about $115,000. I had not put away money for that tax bill. I was not prepared. I didn't do any tax planning before the end of the year, which if I could have, or if I had, I would have ended up cutting that tax bill in half. But by the time that she told me that I owed $115,000 in taxes, it was too late. It was too late to do any tax planning.
Ali Katz:
There were things that I would have needed to do by December 31 of the prior year, she told me by February, and that was too late. I couldn't do tax planning at that point. So what do you need to do? What you need to do is have all of your books reconciled through September, plus have projections of income and expenses created for October, November, December, give all of that to your CPA. Ideally now, hopefully, you're hearing this no later than November. If you're hearing it in December, you can still do it. They may not be able to get what you need in time, but you give it to your CPA and you say, hey, CPA, I need tax projections based on my January through September actuals for the year, plus these income and expense projections for the last quarter of the year. Here's how much I think I'm going to bring in. Here's how much I think is going to go out, and I need tax projections.
Ali Katz:
Plus I would like you to provide me with three alternatives that I could do before the end of the year to reduce my tax liability next year if I'm going to have a tax liability. So that might mean setting up a business entity. If you don't have one, that might mean postponing income into January if you have income that you know is going to come in before the end of the year, but you could push it into January by collecting it January 1 instead of December 31. It might mean accelerating expenses that you know you're going to have next year and paying them in December. It might mean setting up variety of retirement accounts. It might mean setting up new entities that you can shift income into if you have future plans. So there's lots of things that you might be able to do. They would have to happen in December.
Ali Katz:
So that's why you want to get these tax projections now. Now, if you don't have your books reconciled, if you don't have income projections, expense projections, well, that shows you what you need to start working on for the future so that next year you can do this. And so you might want to use some of your revenue for this year is to start to learn about financial systems and how to keep your financial systems updated on a month by month basis. We can help you with that. We have a whole training program on that through my LIFT program, legal insurance, financial tax, LIFT program, where we help you understand how to maintain your financials. So you can ask us about that if that is something that you're seeing that you need to do. And of course, yes, we have a program you can invest in to teach you. And we also have programs you can invest in that will do it for you.
Ali Katz:
So you can go to newlaw.co/show and book a call with a law business advisor to find out all of the different options for us to support you with that. So that's tax time planning. That's now. That's now.
Ali Katz:
Would you love direct support to help you grow your law practice into a business you love? Go to newlawbusinessmodel.com/show and sign up for a call with one of our trusted law business advisors. Each of our advisors has been trained directly by me over the past five years plus to help you chart your path from wherever you are now to where you want to go as efficiently and effectively as possible. You're ready to grow. We are here to help.
Ali Katz:
The other thing that you need to be looking at right now is your necessary beneficial ownership information filing under the Corporate Transparency Act, if you have a business entity and you don't file this beneficial ownership information form with FinCEN. Here in the United States, if you have a business entity, you could be fined up to $500 a day, up to $10,000. Big penalties, big fines. There are some court proceedings that are attempting to say that this is unconstitutional and attempt to get a ruling that this is unconstitutional. And it might be. But if you don't want to be the test case, if you don't want to take the risk, you go ahead and file your beneficial ownership information.
Ali Katz:
And if you're serving business owners, you tell them about it. You tell them about it. Now, I have some various resources for you to get your filing done. For as little as $25. You could do it yourself for free at fincen.gov/boi. It's a little bit of a pain if you are going to do it that way. And since we're lawyers, you can probably just do it that way yourself. I have some resources for non lawyer business owners through my eyes wide open time, money and taxes group on Facebook I've shared where they can pay $25 to do it or they can work with their own lawyer to do it.
Ali Katz:
Generally I've seen lawyers charging between 150 to 250 to do these filings, but you can do it yourself, fincen.gov/boi. One of the recommendations from our law business mentor on our last LIFTed business advisor mastermind was to create a FinCEN ID. When you do it. Apparently that will make it easier for you in the future. And so go ahead and you can create a FinCEN ID. And if you want more support with this or you want to get my resources on the $25 service that you might want to use for your clients, there's also some resources for lawyers that we are looking at that will allow you to do this very easily for your clients. With the company handling all the back and forth with your clients to get their ID information, et cetera. You can check out the service filetransparency.com.
Ali Katz:
That's filetransparency.com. I met Chase. He created this at the WealthCouncel Symposium and it looks like a great service. We're actually looking into whether we will set this up for our Personal Family Lawyer Firm leaders who are LIFTed business advisors so that they can store all of the information for their clients and not have to be the ones holding their hands going back and forth for the lawyers that are handling it. Okay, so tax time planning, corporate transparency, act as a business owner and that's what you are. If you are an entrepreneurial lawyer, the first mindset shift to make is the mindset that says I'm a business owner. That means you set up a business entity even if you're not going to save a bunch of money on taxes this year, even if you aren't going to need the liability protection this year because you're not hiring anyone, you still set up a business entity.
Ali Katz:
Step one to becoming a business owner because that is what creates you as a business owner. You create a business. If you have a sole proprietorship and you're filing your taxes by reporting your income on your schedule C of your personal return, and you don't have any entity, you're not a business owner. You're a sole proprietor. That's not a business owner. In my reality, you want to set yourself up for the future with what you are creating. Your journey to become an entrepreneur, to become a business owner, begins when you can see $250,000 a year of revenue. That then is enough revenue to pay you a six figure salary and to get the support that you need and to maximize your tax savings, your tax benefits. And so that's the first level that I want you to see yourself at. And that starts with your business entity. And then when you have a business entity, you need to plan for taxes and you need to be filing your beneficial ownership report here in the United States so you don't get fined.
Ali Katz:
All right. If you love this episode, if you're seeing yourself as an entrepreneurial lawyer, a business owner, and you want to serve families in your community with life and legacy planning and help them really start to step into their full empowerment around money, around how they use their resources during life, how they plan for their resources, and what happens to those resources at death so they create a real legacy. And if you want to build a business around that, go to newlaw.co/show, book a call with a law business advisor, and let us support you to turn your law practice into a business you love. See you on the inside.